The last 12 months have seen a dramatic increase in the mortgage trust industry with SQM Research confirming growth of 61% in 2019 with funds under management for the sector now exceeding $10 billion.
This growth is the result of tightened lending policies by banks for SMEs, as they focus on traditional residential mortgage loans. This has led to Australian small and medium businesses requiring alternate avenues for their financing needs.
SQM Research confirmed arrears for the mortgage market remain muted, with only funds with elevated exposure to construction loans facing an increased risk of default, another reason our funds do not provide construction finance to property developers on the anticipated end value of security property yet to be constructed.
Property prices across major Australian cities continue to display stability with continued growth in the Sydney and Melbourne markets as a result of ongoing low-interest rates and strong employment numbers as evidenced by the ABS jobs report issued this month. Melbourne home prices experienced a 0.8% increase in the first 21 days of January 2020, followed by 0.7% in Sydney and 0.3% in Brisbane-Gold Coast values.
Economic forecasts suggest official interest rates will continue to remain low, and whilst further cuts later this year are possible it appears the RBA will be sitting back and watching how things play out. The current evidence, based on the recent jobs report and property prices do indicate that last years rate cuts are starting to work.
This article appeared in our January 2020 Investor Newsletter – download the full newsletter here.
